Philippines to benefit from UAE’s Opec exit, increased oil exports, says analyst

The Philippines may have a reason to be optimistic about UAE’s departure from Opec and Opec+ if it would lead to increases in oil production and exports to countries in dire need of steady supply, an independent economic analyst said.

Struggling with fuel supplies due to the Middle East war and constriction of the Strait of Hormuz, the Philippines may benefit from UAE’s decision should the move translate to becoming a greater crude oil source for the Southeast Asian country, Sonny Africa, executive director of think-tank Ibon Foundation, told Khaleej Times on Wednesday.

The London School of Economics and Political Science-trained economist said UAE’s exit from the global oil cartel would give it freedom to increase production and exports that may benefit oil-import-dependent countries such as the Philippines.

Africa said he sees UAE’s decision as a bid to liberate itself from being a largely oil exporter, to allowing itself greater freedom to chart its economic prospects.

“[It] would now allow the UAE to increase oil production and exports for the country’s own diversified future,” think-tank Ibon Foundation executive director Africa told Khaleej Times.

He added the departure affords UAE greater independence from dominant Opec/Opec+ players as well as constrictions from external factors such as those coming from key actors in the ongoing hostilities in the region.   

He, however, expressed doubts the UAE would be able to change oil supply conditions in the immediate as a little over half of its oil exports go through the blockaded Strait of Hormuz while its alternative pipeline route is already at capacity.

UAE’s role in Philippines’ energy landscape

The Philippines’ sole remaining oil processing facility, the Petron Bataan Refinery, currently directly sources 28 per cent of its crude oil from the UAE.

The Southeast Asian country scrambled to find other sources, such as Russia, when geopolitical tensions in West Asia caused supply problems.

Traditionally, more than 90 per cent of Philippines’ crude oil supply comes from Opec-member countries in the Middle East. Opec sets production ceilings that dictate how much oil is available for export by member countries.

Observers expressed hope that UAE’s Opec departure will not create further instability in global markets and cause unpredictable price fluctuations.

Meanwhile, the Philippine peso had dropped to another historic low this week, trading at P61.43 per US dollar, potentially raising fuel pump costs anew in the country’s next price cycle next week.